COLLECTION ACTIONS WERE NOT ALWAYS
PURSUED ON CASES RETURNED FROM THE PRIVATE DEBT COLLECTION PROGRAM

Issued on September 27, 2011

Highlights

Highlights of Report Number:†
2011-30-114 to the Internal Revenue Service Commissioner for the Small
Business/Self-Employed Division.†

IMPACT ON TAXPAYERS

The Private Debt Collection (PDC) Program collected
approximately $98.2 million from delinquent cases that were considered low
yield and generally not worked by the IRS.†
In March 2009, the IRS Commissioner discontinued the PDC Program, and
cases that were assigned to the private collection agencies were returned to
the IRS.† However, the IRSís collection
policies and inventory assignment practices will prevent many of these delinquent
accounts, and similar accounts in the IRSís current inventory, from being
worked.† Taxpayers who do not voluntarily pay their share of taxes create unfair
burden on taxpayers who timely pay their taxes in full and can diminish the
publicís respect for the tax system.† †††

WHY TIGTA DID THE AUDIT

This audit was included in our Fiscal Year 2010
Annual Audit Plan and addresses the major management challenge of Tax
Compliance Initiatives.† The overall
objective was to determine the effectiveness of collection actions taken by the
IRS on taxpayer accounts returned from the PDC Program.† †

WHAT TIGTA FOUND

The IRS took appropriate collection actions on cases
returned from the PDC Program in Fiscal Year 2007.† The Fiscal Year 2007
recall included procedures that required employees to work each case that was
returned.† However, many of the cases
returned in a larger recall in Fiscal Year 2009 were not
worked.†

TIGTA reviewed a
statistical sample of 62 cases returned in Fiscal Year 2009 and found that
collection actions were not taken for 29 (47 percent) of the 62 cases.† These cases were not selected for collection
action due to Collection policies and inventory assignment practices.† TIGTA estimates potentially $30.7 million
in collections will remain as outstanding liabilities.† In addition, TIGTA estimates the IRS may not
collect an additional $103.2 million per year, or $516 million over
the next five years, from similar cases in its inventory that would have
otherwise been assigned to the PDC Program.† †

TIGTA also reviewed a statistical sample of
installment agreement cases returned during Fiscal Year 2009 and determined
no collection actions were taken for six (10 percent) of 61 cases reviewed.† TIGTA estimates potentially $58,000 in
collections will remain as outstanding liabilities.† Finally, the IRS did not capture or use
PDC Program data and results to improve its own collection practices.†

WHAT TIGTA RECOMMENDED

TIGTA
recommended that the IRS 1) ensure Collection policy and procedures are
reviewed for inventory assignment practices to determine if cases that
otherwise would have been assigned to the PDC Program can be worked, or
consider reinstituting the Program; and 2) evaluate private collection agency
best practices and lessons learned for potential improvement of IRS collection
processes.†
†

In their response
to the report, IRS officials partially agreed with the recommendations and stated they began taking steps to address
TIGTAís concerns.† The IRS implemented a
process to improve balance due case prioritization and reviewed collection
agency operations to identify potential best practices.†

TIGTA is encouraged
by the IRSís commitment to improving case selection
and prioritization processes. †However, it
is still unclear how the IRS would actually work lower priority cases like
those eligible for the Program.† †

IRS officials disagreed with the outcome measures.† TIGTA
maintains the outcome measures are reasonable and are based on actual PDC
Program results.†

READ THE
FULL REPORT

To view the report,
including the scope, methodology, and full IRS response, go
to: